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What is a key benefit of calculating the Debt Coverage Ratio?

Assessing emotional factors in property value

Understanding property's legal obligations

Evaluating the ability to cover debt with income

Calculating the Debt Coverage Ratio (DCR) is primarily beneficial for evaluating a property’s ability to generate enough income to cover its debt obligations. The DCR provides insight into the financial health of a property by comparing the property's net operating income to its total debt service. A higher DCR indicates a greater ability to pay off loans, reducing the risk for lenders and investors. This metric is crucial for property owners and managers, as it allows them to ascertain their operational efficiency and financial stability. Therefore, understanding how well a property can support its financial obligations is a vital aspect of investment and property management decision-making.

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Determining the market price of a property

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